Creating a Protected Area Business Plan: Overview
of the process and components recommended by the
Global Conservation Fund
Introduction
What is a Protected Area Business Plan?
The goal of the protected area business plan is to guide the financial development which
will be required to fully implement the site’s management plan. A business plan should
describe the finances and financial management needed to implement a protected area
management plan. The plan should also identify financial sources and opportunities
provided by a protected area.
A business plan is a precondition to GCF support for most long-term financing projects.
The purpose of this document is to provide an overview of GCF’s view of protected area
business planning and an explanation of its importance for our long-term financing grant
approval process. We also intend to provide some guidance as to the components GCF
looks for in reviewing applicant’s business plans.
A well crafted business plan will include a detailed long-term financial plan, an analysis
of current and potential revenue-generating opportunities and a plan for capitalizing on
those opportunities. It will likely include an analysis of available revenue streams,
possibly including an endowment fund, and how the revenue streams might be jointly
applied to protected area management. This analysis in particular, within the context of
a GCF-supported project, may be the first step in developing a long-term financing
mechanism.
GCF Guidelines
There are several components and levels of analysis that should be included in a
protected area business plan. We have outlined these components below, including the
type of data and information needed and the outcome expected from each piece. The
business plan should not be static and that the components outlined below are not
necessarily drafted in consecutive order. The document should develop as each
analysis is completed, and resulting information should be used to refine other parts of
the plan.
In general, most Protected Area Business Plans include a
I. Long-term Financial Plan; and a
II. Business Plan Narrative.
Thus we have divided the document into these two sections, along with a specific
section on the design of a Long-term Financing Mechanism.
There are a number of good resources available to assist with the process of creating a
business plan for a protected area or protected area network. Rather than replicate that
work, we have included references to some of the most useful documents as Additional
Resources.
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I. Long-term Financial Plan
Costing Analysis
The first step and core component of the business plan is a thorough documentation of
all the costs involved in managing the protected area. This document should provide
cost estimates for the following:
• Administration and general operations;
• Surveillance and enforcement;
• Monitoring, evaluation and research;
• Equipment and maintenance, including physical infrastructure to be purchased or
maintained on a recurring basis;
• Outreach and education;
• Alternative income generation programs; and
• Any other activities or programs vital to the successful management of the
site(s).
Most of the information required to complete this can be found within current and past
budgets. However, some essential components (e.g. monitoring, infrastructure) may not
have been fully supported or implemented to date. Therefore, it is important to consider
future needs as well as past costs.
Additionally, many project budgets are broken down by cost type (salaries, equipment,
etc.) whereas it is often useful for a protected area’s ongoing financial plan to be
organized by functional/programmatic area or activity such as those listed above. Doing
so allows direct correlation to the management plan and may provide a clear picture of
which components of management are the most costly or could be made more cost
effective, etc.
The costing analysis should detail at least two scenarios:
• Optimal: The full suite of activities and programs that would provide full and
comprehensive management of the site.
• Basic: The most essential or core costs the must be covered at all times in order
to effectively manage the site.
Revenue Analysis
Once the costs of managing the area are estimated, the current and projected revenue
streams should be analyzed. This part of the financial analysis should evaluate:
• Secured sources of revenue and how these streams of revenue will be used to
cover the costs (e.g. government funds or in-kind contributions may cover only
salaries, grants from donors may be for particular activities); and
• Planned and projected sources of revenue. (Note that the analysis described in
the Business Plan section below will provide more detailed information for the
planned and projected revenue component.)
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Specific funding needs or gaps are identified through comparing costs to revenues at
this stage. For GCF projects, this financial gap analysis helps to inform the potential role
and desired size of an endowment fund to address the gaps.
Long-term Financial Plan
The costing and revenue information is further elaborated in a detailed multi-year
financial plan (minimum of 5 years; 10 years is ideal) that incorporates the figures from
the costing and revenue analysis, as well as the following:
Costs
• Protected area start-up costs transitioning to recurring costs;
• Maintenance or improvements to infrastructure;
• Periodic upgrading/purchase of equipment/technology;
• Any planned land acquisition or expansion of protected area boundaries;
• Additional costs due to future threats; and
• Inflation and/or market fluctuations
Revenues
• Projected growth in endowment capital through interest earned and/or
fundraising, noting that:
o Endowment funds are generally undercapitalized at the outset; and
o It will take at least one year after an endowment fund is established
before any income generated on the capital will be available for use.
• Best estimates of future revenue streams, noting that:
o Projections should be estimated conservatively; it may make sense to
ascribe percentage confidence levels or even apply risk discounts to
assist with planning;
o Capital investments may be required to pursue some revenue streams
(e.g. building roads and facilities for tourism, conducting enhanced
monitoring for carbon offset program); and
o Income from certain activities (e.g., ecotourism, carbon) may be limited in
early years and grow slowly over time.
The financial plan should include two or three scenarios representing best, worst and
likely cases for markets, revenues, etc.
The financial plan should be adaptable, so that updates can be easily made by the
protected area managers to costs, revenues and other variables in the projections. It is
important that the document should be easy to understand by those who will actually be
managing the finances for the protected area. If a consultant is employed to complete
this work, GCF highly recommends that the consultant be required to involve staff in the
process and train those who will be responsible for on-going financial management.
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II. The Business Plan Narrative
In general, the business plan narrative should “identify the area's financial goals, how it
plans to achieve the goals, and the milestones that will be used to measure progress.”1
The narrative describes the financial opportunities offered by a protected area, provides
recommendations on those opportunities that are most cost-effective and viable, and
outlines a strategy for pursuing them. To do this, the plan must draw on the data from
the long-term financial plan and a wealth of additional information about the site and
region.
While the audience of the detailed long-term financial plan is primarily the protected area
managers, the narrative section of the business plan should be designed to serve as a
marketing and communications tool for the protected area. The audience is likely to
include donors, government agencies and investors of various types. Therefore, the
business plan should be clear and compelling, and should inspire confidence in the level
of financial capacity of the protected area managers.
Components of the Narrative
The business development plan should include:
• A general description of the site and its management structure based on the
management plan;
• Key sections of the financial plan (often displayed in charts and tables) along with
a description of methods and assumptions;
• A overview of the “goods and services” that the site provides and the markets
and competition that may exist for those goods and services now and in the
future;
• A detailed assessment of the start-up and ongoing costs of pursuing the most
viable sources of revenue for the site (often two or three sources);
• A detailed assessment of the assumed benefits and income from those revenue
streams, along with an assessment of risk;
• An assessment of the legal and political framework as it relates to pursing those
revenue streams (e.g. whether tourism revenues will be directed at the specific
PA or whether they must be submitted to the central government budget,
whether the protected area has the legal authority to sell biodiversity or other
ecosystem service credits);
• A discussion of the anticipated endowment fund’s role in the financial plan and
general structure; and
• Detailed strategies, next steps, activities and investments required to capitalize
on the most viable opportunities. This may include a short-term fundraising
strategy to raise the needed capital to pursue a particular strategy.
Please note that detailed guidance on identifying, analyzing and selecting markets and
possible revenue streams can be found in the documents listed in the Additional
Resources section below.
1
Conservation Finance Alliance. Business Planning for Protected Areas Guidelines (2003)
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III. The Long-term Financing Mechanism
Most GCF projects contemplate the use of a long-term financing mechanism as part of a
sustainable financing strategy for a protected area. While the focus for GCF is
endowment fund capitalization, long-term financing vehicles may be designed to
manage an endowment fund as well as other revenue streams, such as sinking or
revolving funds, under a single governance structure.
Therefore, we include here a short overview of some of the concepts relating to the LTF
mechanism that may be contemplated indirectly in the business plan. The business
plan, for example, is unlikely to include detailed information about the LTF mechanism’s
structure but understanding, in general, how that structure will impact the flow of funds to
the protected area may assist in the business planning process.
LTF Mechanism Role and Structure
The role of the mechanism may be:
• To hold an endowment which will support the entire cost of managing the
protected area (if no other revenue streams are feasible); or
• To hold an endowment which will provide one of several revenue sources
individually directed at the site; and/or
• To pool and distribute funds from some or all of the other revenue streams by:
o Investing revenues into the endowment capital, as in Figure 2; or
o Holding multiple account “windows” within the broader long-term financing
mechanism structure, including both endowment and sinking funds, as in
Figure 3.
Figure 1. Traditional structure, multiple sources of revenue, in this case including an endowment,
must be managed separately by the PA.
Endowment Endowment
grants account
Concession
license fees
Entrance
fees
Grants
Protected Area
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Figure 2. An LTF mechanism is established, multiple revenue streams directed into the
endowment account, along with some funds granted directly to PA. Funds in the endowment are
not be immediately available in full, but are invested to provide steady revenue in the future.
Endowment Endowment
grants account
Concession
license fees
Long-term Financing
Entrance Mechanism
fees
Grants
Protected Area
Figure 3. All funds are channeled through an LTF mechanism, either into an endowment account
or into a sinking account (or accounts). Budgets and financial management are centralized by the
LTF mechanism governance structure.
Endowment Endowment Sinking funds account(s)
grants account
Entrance
fees
Long-term Financing Concession
Mechanism license fees
Grants
Protected Area
Capitalization Target
The target capitalization of an endowment will be determined based on the gaps
identified in the financial plan. An average of 5% net annual returns is widely used to
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calculate the return on endowment investments2. Using these figures, a “capitalization
target” can be set.
Figure 4. Examples of capitalization targets for different size funds
Annual Recurring Costs Return on Capitalization
From the Endowment Investment Target
$50,000 .05 $1 million
$250,000 .05 $5 million
$600,000 .05 $12 million
$1 million .05 $20 million
It should be noted that some long-term financing mechanisms, particularly those that are
designed to support protected area networks rather than a single site, will have
substantial administrative costs that must be accounted for. Other mechanisms can be
managed at little cost by stakeholder NGOs or other entities, provided legal safeguards
can be put in place to ensure transparency and reduce conflict of interest.
The financial plan and/or long-term financing mechanism’s operations manual should
identify a particular amount that may be drawn from the endowment annually. While
GCF recommends leaving the option open to draw from the endowment capital in certain
circumstances, it should be assumed that only the return on investment (interest) will be
used on an annual basis.
Fund Distribution Policy
A fund distribution policy sets forth procedures for determining the activities that will be
supported through the endowment. The fund distribution policy itself will not be part of
the business plan (it is normally found within the operations manual or by-laws of an LTF
mechanism). We include it here simply to reinforce the linkages between the business
plan and the design of the LTF mechanism.
The policy identifies priorities for funding in the event that needs for funding exceed
available income. This is likely in the early years of the fund when it is undercapitalized
or in years of poor market performance.
In fact, the best, worst and likely case scenarios developed as part of the financial plan
may inform the fund distribution policy in the same way that they inform the business
plan. It is worth considering whether the endowment should target at a minimum those
vital costs that are most difficult to fundraise for annually (e.g. salaries, insurance,
vehicles, monitoring equipment, etc.).
Additional Resources
GCF Tool Kit (2008)
2
The figure of 5% return was developed in a 1998 GEF study of conservation endowment funds. Through
its collaboration with the Conservation Finance Alliance, GCF is coordinating a review of this figure as well
as best practices for endowment investments. As a result, this 5% projection may be revised once this
analysis is complete in late 2008.
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GCF has developed a collection of documents and references developed by GCF and
partners relating to long-term financing mechanisms. This tool kit is available on the
GCF website and as a CD upon request.
Conservation Finance Alliance. Business Planning for Protected Areas Guidelines
(2003)
This document provides a comprehensive guide to the topics discussed above, as well
as further elaboration on identifying and selecting revenue streams. The document also
includes long-term financial plan worksheets developed by CFA and is available on the
Conservation Finance Alliance website (http://www.conservationfinance.org) or by
request from GCF.
Spergel, B. Raising Revenues for Protected Areas: A Menu of Options (2001).
Primarily example-based, this concise document describes some of the many revenue
opportunities that may be available for protected areas. Additionally, an appendix lists
the recommended steps for setting up a conservation trust fund.
Phillips, A. Financing Protected Areas: Guidelines for Protected Area Managers.
IUCN (2000)
An IUCN perspective on business planning for protected areas, why it’s important and
the types of revenues that might be pursued.
